C33. Business combinations

Business combinations during the period

Tele2’s Norwegian operations

After the Norwegian Competition Authority approval TeliaSonera acquired Tele2’s Norwegian mobile operations on February 12, 2015. The results of the acquired operations were included in the consolidated financial statements as of February 12, 2015. The acquisition included 100 percent of all outstanding shares in Tele2 Norge AS and Network Norway AS and their subsidiaries and joint ventures. As part of the remedies provided in order to get the approval, TeliaSonera has signed an agreement with mobile operator ICE Communication Norge AS (ICE) partly on national roaming, partly on the sale of the customer base and the marketing and sales organization of Network Norway, which provides voice communication solutions to companies. In addition TeliaSonera has sold infrastructure to ICE.

The transaction is a strategic fit for the group and in line with the ambition to strengthen TeliaSonera’s position in the core markets. The greater scale will improve TeliaSonera’s competitiveness and ability to offer mobile internet to enterprise customers and consumers in Norway, including the rural areas where large investments are needed.

The cost of combination, fair values of assets acquired including goodwill and liabilities assumed are presented in the table below. The table includes the effects of all the related transactions, including remedies provided. The total cost of the combination includes repayment of certain borrowings of SEK 3,043 million to Tele2. The total cost of the combination has been impacted by negative cash flow, interest and seasonal changes in working capital since the agreed locked box date as of May 31, 2014.

SEK in millions

   

Tele2 Norway

Cost of combination

     

Cash consideration

   

5,138

Contingent consideration

   

Total cost of the combination

   

5,138

Fair values of net assets acquired

     

Intagible assets (mainly customer contracts)

   

2,882

Property, plant and equipment

   

316

Deferred tax assets

   

1,054

Other non-current assets

   

68

Current assets

   

936

Total assets acquired

   

5,256

Deferred tax liabilities

   

743

Other non-current liabilities

   

322

Current liabilities

   

768

Total liabilities assumed

   

1,833

Total fair value of net assets acquired

   

3,423

Goodwill

   

1,715

The cash-flow effects were as follows.

SEK in millions

   

Tele2 Norway

Total cost of the combination paid in cash

   

5,138

Less acquired cash and cash equivalents

   

-1

Net cash outflow from the combination

   

5,137

Goodwill consists of the knowledge of transferred personnel and expected synergies from the assets merged to the network and operations of TeliaSonera. No part of goodwill is expected to be deductible for tax purposes.

The fair value of acquired receivables with fair value of SEK 614 million (whereof trade receivables SEK 504 million and loans SEK 110 million), had gross contractual amounts of SEK 654 million (whereof trade receivables SEK 544 million and loans SEK 110 million). The best estimate at the acquisition date of the contractual cash flows not expected to be collected were SEK 40 million (relating to accounts receivables only). Acquisition-related costs of SEK 10 million and SEK 17 million have been recognized as other operating expenses in 2015 and 2014, respectively. Compared to the preliminary fair values presented in the interim report for the first quarter of 2015, goodwill has been reduced by SEK 141 million as a result of increased fair values for current assets. Other changes relate mainly to reclassifications.

The acquired Tele2 Norway entities were merged into TeliaSonera Norway as of July 1, 2015. Information on revenue and net income of Tele2 Norway for 2015 is therefore not available. Disclosures on amounts of revenue and net income of Tele 2 Norway since the acquisition date included in the consolidated statements of comprehensive income are therefore not presented. If Tele2 Norway had been acquired at the beginning of 2015, revenue and net income for the TeliaSonera group had been SEK 87,011 million and SEK 10,239 million respectively.

Other minor business combinations during the period

On January 2, 2015, TeliaSonera acquired all shares in Transit Bredband AB. The cost and net cash outflow of the combination was SEK 22 million. On June 8, 2015, TeliaSonera acquired all outstanding shares in the Finnish company ict-verstas Oy. The cost of the transaction, SEK 28 million, was paid in cash. On August 3, 2015, TeliaSonera acquired all shares in the Estonian company Green IT OÜ. The cost of the transaction was SEK 35 million, whereof SEK 21 million was paid in cash. On October 5, 2015, TeliaSonera acquired all shares in the Swedish company Växjö Support Center Försäljnings AB for SEK 5 million which was paid in cash. The costs of the combinations and fair values have been determined provisionally, as they are based on preliminary appraisals and subject to confirmation of certain facts. Thus, the purchase price accounting is subject to adjustment.

© TeliaSonera 2015
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